India and Nepal signed an agreement on Monday to construct a 41-km-long oil pipeline connecting both countries.
The memorandum of understanding (MoU) of the Rs 275 crore project was signed by Indian petroleum minister Dharmendra Pradhan and Nepal’s minister for commerce and supplies Sunil Bahadur Thapa.
Two kilometers of the pipeline connecting Raxual in India and Amlekhganj in Nepal will be constructed on the Indian side of the border and the rest in Nepal.
The project is expected to be completed within 30 months after construction has started.
“It is an important project that would benefit both countries and we hope that it would be completed before the 30 month deadline,” Pradhan stated after the signing ceremony.
India is the sole supplier of petroleum products to Nepal.
Though there have been talks of constructing a pipeline for two decades, the project gained momentum after Prime Minister Narendra Modi’s visit to Nepal last year.
Public sector Indian Oil Corporation is slated to construct the pipeline. India is to provide Rs 200 crores while the rest would come from Nepal government.
Besides reducing annual transportation costs by an estimated Rs 70 crores, the pipeline will also ease traffic congestion at Birgunj in Nepal---the busiest border point for trade between both countries.
“It is a historic day for the petroleum sector in Nepal. Once the project is completed, we would try to extend it till Kathmandu,” said Thapa.
Indian Oil Corporation will have monopoly of supplying petrol products through the pipeline for a period of 15 years once construction is completed.